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G20 rose to prominence in response to 2008 financial crisis, it needs similar reinvention today

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G20 rose to prominence in response to 2008 financial crisis, it needs similar reinvention today

The 13th summit of the Group of Twenty (G20) nations in Buenos Aires, Argentina, is occurring when multilateralism is in peril and doubts about the relevance of this unique grouping are mounting. To justify itself and continue to be a problem solver, the institution will require new vision and a revamp in orientation. The G20 was reinvented once before in history and it is possible for it to undergo another transformation now, provided there is self-reflection and internal consensus-building.

In 2008, amid the throes of the global financial crisis, world leaders upgraded G20 from what used to be an obscure finance ministers’ conference into a high-profile meet of powerful heads of government and state to coordinate policies and tackle the worst financial crash since the Great Depression of the 1930s. Every year since 2008 panicked investors, traders and average citizens looked up to G20 summits as key morale boosters that signalled collective will of the international community to protect vulnerable consumers and taxpayers from further economic shock and to rein in financial speculators.

In its heyday, G20 was an exemplary multilateral experiment that worked because of the direness of the economic crisis. Selfish instincts and narrow nationalistic tendencies did not disappear, but they were sublimated so that the global ‘system’ as a whole could be saved.

Today, with the worst effects of the 2008 crisis ebbing, that glue of existential fear which bound G20 members is gone. The G20’s raison d’etre of being a steering mechanism to fight systemic economic collapse lacks validity in light of improved GDP growth and macroeconomic health in member countries.

When the houses are less inflammable, the fire engine loses its seminal importance. Homeowners can ignore or withdraw from the collective institution due to misguided self-confidence that they can handle their affairs without external help and meddlesome rules.

The belief that each country can solve its issues free of advice or supervision from global institutions is now flourishing. Leading this anti-multilateral wave is US President Donald Trump, who rejects the “ideology of globalism” and prefers sovereign decisions that benefit one’s own citizens alone.

Until Trump arrived on the world scene in 2017, G20 thrived on the premise that in an interdependent world, unthoughtful actions and policies of one country can negatively impact other countries. Now, however, populists are openly flouting the G20’s core principles. Getting these ultra-nationalists to sign even a non-binding joint communique at the end of a multilateral summit has become an ordeal.

Today, there is a reversion to the pre-2008 scenario where inequalities, imbalances and breakneck risk taking defined the global economy. Can the present G20 halt this regression or will it fade away as we move further from the unifying moment of the 2008 crisis and forget its lessons?

The only way for G20 to remain central to governing the global economy from now on is to reimagine itself as preventer of future recessions. Prescient economist Nouriel Roubini, who foresaw the 2008 crash, estimates that if current economic nationalism and complacency go on the next global downturn will arrive by 2020.

G20 should wake up to the reality that financial risks and unjust economic policies are again rearing their heads. Even if the US under Trump plays spoiler, likeminded countries within the G20 should flag these alarming trends and establish smaller sub-group mechanisms to forestall the next economic disaster.

Acting shortsightedly that no crisis is on the horizon, and behaving as though all G20 needs to do now is to focus on steady and unexciting long-term socioeconomic development in various regions of the world is a formula guaranteeing extinction. For this most necessary institution to survive and serve its purpose, the fire alarm must never be put to rest.